Tour v Australia and New Zealand Banking Group Ltd
[2024] FCA 1513
•19 December 2024
FEDERAL COURT OF AUSTRALIA
Tour v Australia and New Zealand Banking Group Ltd [2024] FCA 1513
File number: VID 706 of 2021 Judgment of: BEACH J Date of judgment: 19 December 2024 Date of publication of reasons: 20 December 2024 Catchwords: CORPORATIONS — finance industry class action — claims concerning the retrospective charging of interest under credit card contracts — settlement of proceeding — approval of settlement under s 33V(1) of the Federal Court of Australia Act 1976 (Cth) — distribution orders under s 33V(2) Legislation: 1 Corporations Act 2001 (Cth) Ch 5C
2 Corporations Amendment (Litigation Funding) Regulations 2020 (Cth)
3 Federal Court of Australia Act 1976 (Cth) ss 33V, 33ZF
Cases cited: LCM Funding Pty Ltd v Stanwell Corporation Ltd (2022) 292 FCR 169
Newstart 123 Pty Ltd v Billabong International Ltd (2016) 343 ALR 662; [2016] FCA 1194
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 106 Date of hearing: 19 December 2024 Counsel for the Applicant: Mr P W Collinson KC and Ms E Dias Solicitors for the Applicant: Phi Finney McDonald Counsel for the Respondent: Dr M Rush KC and Mr T Jeffrie Solicitor for the Respondent: Ashurst Australia Counsel for Intervener: Mr J Arnott SC
ORDERS
VID 706 of 2021 BETWEEN: DANIEL JEAN-MARIE TOUR
Applicant
AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD (ACN 005 357 522)
Respondent
ORDER MADE BY:
BEACH J
DATE OF ORDER:
19 DECEMBER 2024
OTHER MATTERS:
A.This order adopts the definitions in the orders of Justice Beach made on 31 May 2024.
B.Order 2 below is to be read such that to the extent that it extends to the releases in the Settlement Deed, it only confers authority concerning clause 11 as if the words “under credit card contracts” appeared after the words “Relevant Period” in clause 11(a)(ii)(C) so that it reads “… during the Relevant Period under credit card contracts in circumstances …”.
C.The names in Annexure B are the names identified confidentially to the chambers of Justice Beach.
THE COURT ORDERS THAT:
Approval of Settlement
1.Pursuant to ss 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth) (the Act), settlement of the proceeding upon the terms set out in the deed of settlement dated 25 March 2024 executed by the Applicant, the Respondent, the Woodsford Parties (being Woodsford Litigation Funding 19 LLP (Company number OC433055 (England and Wales Foreign Company))); Woodsford Group Limited (Company number 07327885 (England and Wales Foreign Company)); and Woodsford Australia Pty Limited (CAN 644 961 446)), and Phi Finney McDonald Pty Ltd (PFM) (Settlement Deed), and upon the same or substantially similar terms set out in the Settlement Distribution Scheme (and any annexures thereto) exhibited to the affidavit of Brett David Orion Spiegel dated 29 November 2024 (Settlement Distribution Scheme) (together, the Settlement Documents) be approved.
2.Pursuant to s 33ZF of the Act, the Court authorises the Applicant nunc pro tunc for and on behalf of persons who meet the definition of “Group Member” in the further amended statement of claim filed on 27 April 2023 and who have not opted out of the proceeding in accordance with order 5 of the orders dated 31 May 2024, to enter into and give effect to the Settlement Documents and the transactions contemplated for and on behalf of registered Group Members.
3.Pursuant to ss 33ZB and 33ZF of the Act, the persons affected and bound by these orders and the settlement of the proceedings be the Applicant, the Respondent, and Group Members who have not opted out.
4.Pursuant to ss 33V(2) and 33ZF of the Act, Mr Brett David Orion Spiegel of Phi Finney McDonald be appointed administrator of the Settlement Distribution Scheme (Administrator) and is to act in accordance with the rules of the Settlement Distribution Scheme, subject to any direction of the Court.
5.Pursuant to ss 22, 23 or 33ZF of the Act, rule 1.32 of the Federal Court Rules 2011 (Cth) and/or the Court's implied jurisdiction, upon the making of the distributions as set out in Order 4 above, the proceeding be dismissed on the basis that the dismissal is a defence and absolute bar to any claims or proceedings by the Applicant, or Group Members who have not opted out, against the Respondent in relation to, concerning, or arising from the subject matter of the Proceeding,
(a)without prejudice to:
(i)the right of any party to make an application to enforce the Settlement Deed in a new proceeding;
(ii)the right of any Group Member who has opted out of the proceeding;
(iii)the right of the Administrator of the settlement distribution to refer any issues relating to the Settlement Distribution Scheme to the Court for direction or determination in accordance with the terms of the Settlement Distribution Scheme; and
(b)with no order as to costs.
6.All outstanding costs orders in the proceeding are vacated.
7.Any and all orders requiring the provision of security for costs are vacated and/or any security furnished pursuant to those orders is to be returned.
Applicant’s Costs and Expenses
8.Pursuant to ss 33V and 33ZF of the Act, and for the purposes of the Settlement Distribution Scheme, the following distributions from the settlement sum be approved:
(a)The Applicant’s Legal Costs and Disbursements (as defined in the Settlement Distribution Scheme) incurred in connection with the proceeding on the Applicant’s behalf and on behalf of all Group Members in the proceeding, in the amount of $7,105,728.34, comprised of:
(i)Professional Fees and Disbursements paid by the Funder in the amount of $4,626,357.30; and
(ii)The Remaining Costs (as defined in the Settlement Distribution Scheme) in the amount of $2,479,371.06.
(b)The Funding Commission (as defined in the Settlement Distribution Scheme) in the amount of $14,375,726.12;
(c)The ATE Insurance Costs (as defined in the Settlement Distribution Scheme) in the amount of $1,167,148;
(d)The Managed Investment Scheme Costs and third party costs due (as defined in the Settlement Distribution Scheme) in the amount of $250,839;
(e)The Applicant’s Reimbursement Payment (as defined in the Settlement Distribution Scheme) for his time and expenses incurred in prosecuting the proceeding in the interests of Group Members, in the amount of $6,512.44; and
(f)No more than $463,331.50 to the Administrator for the costs and disbursements incurred by the Administrator in connection with the administration of the Settlement Distribution Scheme, from the date of the approval of the Settlement Documents to the date of completion of distribution of the Settlement Sum (within the meaning of the Settlement Distribution Scheme).
Return or destruction of documents
9.Subject to any obligation to maintain documents to comply with legal or professional obligations, and excluding any documents where the data has formed part of a routine backup, by 28 March 2025, each of:
(a)the Applicant;
(b)PFM;
(c)Phi Finney McDonald UK Ltd; and
(d)the Woodsford Parties
(together, the Receiving Parties),
must destroy or return to the Respondent’s solicitors all documents (including photocopies and electronic documents) that are:
(a)within their possession, custody or power; or
(b)within the possession of any external agents, representatives, solicitors, experts or counsel they have retained; and
(c)that were produced by the Respondent:
(i)pursuant to orders 3 and 4 of the orders of Justice Beach made in this proceeding on 20 December 2021;
(ii)pursuant to order 15 and Appendix A of the orders of Justice Beach made in this proceeding on 3 April 2023; and/or
(iii)on a confidential and without prejudice basis for the purposes of mediation of the proceeding, other than those documents provided under order 8 of the orders of the Court made in this proceeding on 31 May 2024 and order 2 of the orders of the Court made in this proceeding on 18 June 2024.
10.Subject to any obligation to maintain documents to comply with legal or professional obligations, and excluding any documents where the data has formed part of a routine backup, the Receiving Parties must, by no later than 30 business days after the dismissal of this proceeding pursuant to order 5, destroy or return to the Respondent all documents (including photocopies and electronic documents) that are:
(a)within their possession, custody or power; or
(b)within the possession of any agents, representatives, experts or counsel they have retained; and
(c)which contains information provided under order 8 of the orders of the Court made in this proceeding on 31 May 2024 and order 2 of the orders of the Court made in this proceeding on 18 June 2024.
11.If any of the Receiving Parties elects to destroy, rather than return, the documents described in orders 9 or 10, they must write to the Respondent’s solicitors upon the expiry of the time period allowed by that order (as applicable) and certify that all documents, apart from any that have been returned, have been destroyed in compliance with that order.
Confidentiality
12.Pursuant to ss 37AF and 37AG(1)(a) of the Act, in order to protect prejudice to the proper administration of justice, each of:
(a)The confidential joint opinion of counsel (Counsel Opinion);
(b)The parts of the Affidavit of Brett David Orion Spiegel affirmed 29 November 2024 (Third Spiegel Affidavit) identified in Annexure A hereto;
(c)The parts of the Affidavit of Brett David Orion Spiegel affirmed 13 December 2024 (Fifth Spiegel Affidavit) identified in Annexure A hereto;
(d)The parts of the Affidavit of Charles Samuel Morris affirmed 2 December 2024 (Morris Affidavit) identified in Annexure A hereto;
(e)The parts of the Applicant’s Outline of Submissions dated 13 December 2024 identified in Annexure A hereto (Applicant’s Outline of Submissions);
(f)The parts of the Funder’s Outline of Submissions dated 13 December 2024 identified in Annexure A hereto (Funder’s Outline of Submissions);
(g)The report of Ian Ramsey-Stewart dated 25 November 2024 (Referee Report); and
(h)The report of Ian Ramsey-Stewart dated 10 December 2024 (Supplementary Referee Report);
(Confidential Materials) is to be kept confidential and is not to be accessed by any person other than the Court, the Applicant, the Applicant’s legal representatives, and the Woodsford Parties, for the period specified in order 13.
13.Subject to further order, the periods during which order 12 operates are as follows:
(a)In respect of material identified in Part 1 of Annexure A: a period of five years;
(b)In respect of the Counsel Opinion, Appendices 2-5 of the Referee Report, Appendix 1 to the Supplementary Referee Report, and material identified in Parts 2 and 3 of Annexure A: until further order;
(c)In respect of material identified in Part 4 of Annexure A:
(i)until the day that is 38 days after the date on which an order for approval of the proposed settlement of this proceeding (the Settlement Approval Order) is made or alternatively the day such an order takes final effect, whichever is later;
(ii)if the Settlement Approval Order does not take final effect, then until further order,
(d)In respect of the material identified in Part 5 of Annexure A: a period of five years.
(e)In respect of the material identified in Part 6 of Annexure A: a period of three years. and for the purpose of these orders Final Effect means the resolution of all appeals and any further appeals in respect of the Settlement Approval Order.
14.The Confidential Materials are prohibited from being disclosed by publication or otherwise, unless as otherwise permitted by orders 12, 15 or 16.
15.Upon expiration of the time period fixed by order 13(c)(i), and if the Settlement Approval Order has taken Final Effect, the Applicant shall file copies of the Third Spiegel Affidavit and Fifth Spiegel Affidavit, the Referee Report (but excluding Appendices 2-5) and the Supplementary Referee Report (but excluding Appendix 1) redacting (or, in the case of Exhibit BDOS-6 to the Third Spiegel Affidavit and Exhibit BDOS-9 to the Fifth Spiegel Affidavit, removing) all material identified in Parts 1, 2, 3 and 5 of Annexure A (and if any appeal means that the Settlement Approval Order does not take Final Effect then this order 15 shall lapse).
16.Nothing in these orders or otherwise operates to make confidential, or inhibits access to or disclosure (by publication or otherwise) of the content of the version of the Third Spiegel Affidavit or Fifth Spiegel Affidavit, and the Referee Report and Supplementary Referee Report prepared and filed in accordance with order 15.
Legal guardians and representatives of registered Group Members
17.Pursuant to s 33ZF of Federal Court of Australia Act 1976 (Cth), the Applicant and the Administrator need not verify the identity of a legal guardian or authorised representative or take any other action in order to rely on a declaration completed by that legal guardian or authorised representative within the individualised online portal (referred to in Order 6 of the Orders made on 31 May 2024 in this proceeding) as proof of authority to act on behalf of a Group Member.
Other
18.Pursuant to s 33ZF of the Act, the Group Members identified in the Confidential Schedule in Annexure B be deemed registered Group Members.
19.By before 7 January 2025, the Applicant must provide to the Respondent an encrypted customer reference number for each Group Member that is registered pursuant to order 18.
20.By 16 January 2025, the Respondent will provide to the Applicant the data identified in order 8 of the orders made on 31 May 2024 for each Group Member deemed as registered pursuant to order 18 and for whom an identifier has been provided pursuant to order 19, formatted consistently in an Excel spreadsheet or csv format.
21.Pursuant to s 33ZF of the Act, the information referred to in order 20 must not be disclosed other than to:
(a)the parties to this proceeding and their solicitors;
(b)this Honourable Court; and
(c)an agent or representative appointed by the Applicant, on a confidential basis for any of the following purposes:
(i)any use pursuant to, or to comply with, the proposed scheme for the distribution of the settlement among Group Members (Settlement Distribution Scheme);
(ii)effecting the registration of Group Members; and/or
(iii)calculating the entitlements to be distributed to each registered Group Member.
Note: Annexures A and B have not been reproduced here, but the authenticated order is available on the Commonwealth Courts Portal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BEACH J:
The applicant seeks approval of a proposed settlement of this finance industry class action pursuant to ss 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth). The proceeding concerns what has been said to be the impermissible charging of retrospective interest under credit card contracts.
The applicable principles are not in doubt concerning whether to approve a settlement under s 33V.
First, my discretion is broad and its exercise is only limited by the necessity that it be exercised judicially having regard to the particular circumstances of the case.
Second, the central question is whether the proposed settlement is a fair and reasonable compromise of the claims made on behalf of the group members who will be bound by the settlement.
Third, one approaches the question by asking whether the proposed settlement is fair and reasonable as between the parties having regard to the claims of the group members (inter partes fairness), and then whether the proposed settlement is fair and reasonable as between the group members (inter se fairness).
Fourth, there is not usually one single or clear way in which a settlement should be framed. Reasonableness is a range, and the question is whether the proposed settlement falls within that range.
Fifth, the parties and their legal representatives are often in a better position to appreciate the risks associated with the proceedings. Moreover, different parties will have different appetites for risk. It is not my present task to second-guess the commercial strategies or other decisions made by an applicant’s legal representatives, but rather to satisfy myself that the decisions are within the reasonable range of decisions.
Sixth, in determining whether to approve a proposed settlement, the Court assumes a protective role in relation to group members’ interests. In this respect the interests of the parties may not wholly coincide with the interests of group members, and relatedly, both parties may have an affection for the deal and consequently may not critique the settlement from the perspective of any group members who may be disadvantaged by the proposed settlement.
Seventh, in relation to inter se fairness, a particular concern is to confirm that the interests of the representative applicant, or signed-up clients of a given firm of solicitors, are not being preferred over the interests of other group members. The arrangement should be framed to achieve a broadly fair and cost-effective division of the proceeds, including treating like group members alike. This may involve judgment calls being made where a range of alternative approaches might have been open to be adopted.
Eighth, inter se fairness also involves other procedural considerations as to the fairness of a proposed distribution process, such as whether appropriate individuals have been nominated to administer such a process, whether the procedures for lodging and assessing claims are appropriate and to be conducted in a timely manner, and whether any relevant scheme incorporates appropriate checks and balances such as procedures for ensuring consistency between assessments.
Now of course the above considerations are not necessarily exhaustive and some are not mandatory. And more generally, the decision required is evaluative and impressionistic.
Notification of group members about the proposed settlement and their responses
There were estimated to be 2,228,895 group members in the class based on information provided by ANZ, of which 1,423,157 (63.9%) were current customers and 805,738 (36.1%) were former customers. Data was subsequently provided by ANZ in respect of 2,225,896 group members.
In orders made on 31 May 2024 and revised on 30 July 2024, I approved a notice of proposed settlement and made orders for its distribution (including a distribution protocol). I also approved a form of text to be displayed on the Phi Finney McDonald (PFM) website. In accordance with the orders approximately 1,835,098 emails containing the notice were sent and opened by group members and approximately 2,150,420 text messages were sent and delivered to group members. And in respect of any group members whose initial mode of correspondence (email or text) failed such as by way of “bounce back”, the notice correspondence was delivered by alternate means (email or text) where the relevant contact details were available.
Further, between 1 August 2024 and 4 October 2024, PFM employees and temporary call centre staff responded to 45,316 email, SMS and telephone enquiries. The temporary call centre consultants worked a total of 1,741 combined hours up to the opt out and registration deadline.
As at the opt out and registration deadline of 4 October 2024, 299,512 group members had registered, while 76 group members requested to opt out. The applicant and PFM received 3,340 additional registrants between the opt out and registration deadline and 14 November 2024, each of whom was accepted as a late registrant by the applicant pursuant to the discretion under order 11 of the 31 May 2024 orders. Accordingly, the total number of registered group members is 302,896, representing 13.6% of the class.
Three notices of objection were received. I have considered these, but they provide no bar to my approval.
Submission of Mr Tristan Cook
On 28 November 2024, a submission was received from a registered group member, namely, Mr Tristan Cook, which was not in the form of an objection notice, but which nonetheless expressed concerns about a number of aspects of the opt-out notice and registration process. Further, an amended submission and an affidavit affirmed by Mr Cook were forwarded to the Court on 11 December 2024.
Broadly, Mr Cook’s amended submission raised the following principal concerns about the notification process; I have not exhaustively set out his position.
First, the one-time link provided to group members to register, object or opt out of the proceeding suffered from technical barriers such as a blockage by a firewall, with no alternative means being provided to access registration or objector forms.
Second, there were difficulties in accessing further information including from PFM websites, again due to technical barriers.
Third, there was a lack of clarity in the objection process by which group members were not given an obvious method of objecting after registering.
Fourth, there was inadequate time provided to group members to make an informed decision, including because the estimated settlement amount per group member was not provided before the deadline for registration or opt-out.
Fifth, the delivery of information was inadequate because the link provided to group members did not download information for the user and was not saved, there was a large volume of material to consume, group members may have been unable to return to the information after accessing it, and access on certain devices may not have been conducive to group members consuming the information.
Now it is apparent that the majority of Mr Cook’s complaints relate to the method by which the notice was disseminated to group members and its contents.
I should note that Mr Cook appeared on a video-link yesterday and I had a discussion with him about his concerns.
First, whilst his submission refers to anecdotal evidence from other group members in relation to the asserted technical difficulties and settlement entitlements, no detail or evidence is provided in his affidavit in respect of such experiences by other group members so as to permit them to be properly tested.
Second, conversely, there is evidence before me that:
(a)2,090,783 group members were sent the notice in tranches by email, text messages and in some cases both, which figure does not include emails and text messages which were undeliverable and/or rejected;
(b)302,896 group members were able to access the portal using their one-time link and were able to also register their desire to participate in the settlement;
(c)76 group members were able to access the portal using their one-time link and register their decision to opt out of the proceeding;
(d)during the opt out and registration process 45,316 enquiries in total were received and responded to from potential group members.
Third, in accordance with my earlier orders, group members were given notice of the registration process and the consequences of not registering and not opting out. In this regard, the approved notice clearly informed recipients of their options and how to seek further information. The FAQs provided more detailed information if desired.
Fourth, to the extent that Mr Cook’s submission takes issues with the electronic method of distribution of the notices, s 33Y relevantly provides for all manner of distribution methods.
Fifth, with respect to Mr Cook’s assertion of the non-disclosure of individual estimated settlement amounts or disbursements, which I interpret to mean individual group member entitlements, participation rates or related figures, such estimates were uncertain before the close of registration and dependent on a number of variables, including the extent of registration and the receipt of loss data from ANZ. It was simply impractical to provide group members with estimates prior to the close of registration.
Sixth, group members were given a reasonable period of time, being between 6 to 9 weeks, depending on when in the distribution cycle a group member was sent the notice, in which to register, opt-out or object. Further, insofar as certain group members sought to register after the registration deadline, those group members have been treated as registered group members. Moreover, in the orders that I have made I have treated a further small number of group members as registered.
Seventh, the establishment of the three subgroups proposed by Mr Cook and the “reporting” by representatives of each subgroup envisaged by Mr Cook would give rise to further costs and dilution of group member entitlements, and also delay the transfer of entitlements to group members.
In summary, group members have not been disadvantaged by the notification process and have been given a reasonable opportunity to take steps to protect their position.
Finally, in my view Mr Cook has raised three points that may warrant further consideration by applicants’ lawyers in the future concerning notifications to group members.
First, the issue of spam blocking needs to be considered, although I accept that this can in part be a function of anti-virus software and the type of operating system running on the particular device being used, which are matters outside the control of applicants’ lawyers.
Second, there is a one time link concern, but I realise that this is in part justified by security issues that may otherwise arise.
Third, there is the problem in some circumstances that group members may not be able to keep a permanent record on their own systems of some of the communications received or their own responses.
Now of course any system will not be perfect and security concerns need also to be balanced. Further, there has to be proportionality in terms of the practicality of the procedures to the context and the expense involved. But certainly the procedures in the present case worked on the whole as designed and as my orders contemplated. I need say nothing further.
The fairness and reasonableness of the proposed settlement on an inter partes basis
The agreed settlement sum is $57.5 million. Under the proposed settlement distribution, $34,130,714.59, or 59.36% of the settlement sum, will go to group members.
Participating group members, being those entitled to receive compensation above the threshold stipulated in the settlement distribution scheme (SDS), will receive approximately 66.1% of the estimated retrospective interest charged to them by ANZ before costs.
The average estimated retrospective interest charged to participating group members was $325.75. In comparison, participating group members will receive an average of $215.41 if the settlement is approved before costs. After costs, it is estimated that participating group members will receive an average of $127.86 net of costs and 39.3% of estimated retrospective interest charged to them net of costs.
These figures are an estimate due to the fact that there is the possibility that certain participating group members may fail to provide any or workable bank details in order to receive their entitlement, which would increase the sums going to participating group members.
The applicant and his legal advisors consider that the proposed settlement is fair and reasonable on an inter partes basis. I agree and do not need to elaborate on that aspect.
The fairness and reasonableness of the proposed settlement on an inter se basis
As regards inter se fairness, I must be satisfied that the proposed SDS achieves a fair and equitable division of the settlement sum, and that the interests of the representative party or any represented group members are not being preferred over the interests of other group members, in the absence of any compelling reason for such preferential treatment.
The method of calculating and distributing the group members’ entitlements under the proposed SDS is fair and reasonable.
The SDS provides for payments to be made in respect of group members on a pro rata basis, that is, proportionate with each member’s loss, where the group member is eligible. The confidential opinion of counsel addresses in detail why this approach is reasonable in the circumstances, a view with which I agree.
Further, the SDS does not distinguish between the applicant on the one hand and group members on the other in terms of the procedures to be followed. The same assessment methodology will apply to all.
Now the SDS provides that distributions under the scheme are subject to a minimum threshold of $5. That threshold is reasonable given the costs associated with distributions below the proposed threshold are likely to exceed the distribution amount. Further, group members with entitlements of less than $5 will suffer minimal (if any) real prejudice from being excluded from distribution.
Further, a fair and transparent process has been implemented for notifying each registered group member of their estimated entitlement, with estimates sent to registered group members between 22 November 2024 and 29 November 2024.
Further, the SDS contains a practical and efficient process by which group members can receive their entitlement, that is by providing their bank details to PFM. It is efficient for PFM to distribute payments by way of bank transfer. Group members will also be given ample opportunity to provide their bank details, with the deadline for doing so being extended to 17 January 2025 and multiple reminders sent to those who have not done so.
For the above reasons, the SDS achieves a fair and equitable distribution of the settlement sum between group members.
Proposed priority payments from the settlement sum
Now there are broadly six heads of litigation, funding and administrative costs that are proposed to be paid out of the settlement sum as follows.
First, there is $7,105,728.34 to meet the legal costs and disbursements of the applicant to date, split up as follows. There is an amount to the funder as reimbursement for that part of the action costs which comprises legal costs paid by the funder. Further, there is an amount to PFM as payment of the remaining costs, being the component of professional fees carried on a conditional basis by PFM, plus a 25% uplift on those fees carried on a conditional basis.
Second, there is a sum not exceeding $463,331.50 to meet the future costs of the administration of the settlement.
Third, there is $14,375,726.12, being 27.5% of the net proceeds as defined in the funding agreement, to be paid to the funder as its total entitlement to funding commission under the funding agreement between the Woodsford parties and the applicant.
Fourth, there is $1,167,148 to the funder for the holding of after-the-event insurance in the proceeding.
Fifth, there is $250,839 to Woodsford Australia in respect of fees and third-party costs incurred in relation to the managed investment scheme previously required in order to fund the group proceeding, and the progression and prosecution of the proceeding, including payment of the finder’s costs.
Sixth, there is $6,512.44 to the applicant as reimbursement of his costs incurred on behalf of group members.
In my view all of these amounts have been properly justified.
Identity of the settlement administrator
The SDS provides for Mr Spiegel of PFM to be appointed as settlement administrator. Now it may be accepted that it will not always be appropriate for the law firm acting for the lead applicant to act as administrator of the SDS. This may be because, for example, another administrator could perform the role more cheaply, or potentially because the law firm is subject to conflicts.
But in the present case, it is appropriate for Mr Spiegel of PFM to act as settlement administrator. First, PFM has already incurred the bulk of costs which would ordinarily be associated with settlement distribution and has had extensive involvement in dealing with group members. Second, it is estimated that PFM can perform the distribution under the SDS more cheaply than an external provider. Third, PFM has extensive experience in administering SDSs. And fourth, there is no suggestion that PFM is conflicted in acting as administrator.
In the circumstances, PFM’s appointment is the most efficient and economical outcome for group members, as opposed to an external provider being appointed to administer the SDS or for a tender to occur.
Review mechanisms
Now the SDS does not involve any formal processes for group members to request a review of the assessment of their entitlement. But this reflects the following practicalities.
First, the SDS involves data provided by ANZ, derived from ANZ’s records. As such, it is unlikely to contain errors.
Second, it is unlikely that a group member could provide any additional detail, beyond that provided by ANZ, which would materially affect calculation of their entitlement.
Moreover, the SDS provides that the settlement administrator may refer any issue relating to the SDS to the Court for direction or determination, which is a suitable safeguard in the event that there is a dispute with a group member over a distribution calculation. If necessary, such a dispute might be the subject of a Court direction or determination if it is unable to be resolved by PFM and the group member in the first instance.
Legal guardians and representatives of group members
Now pursuant to s 33ZF, the applicant seeks orders that neither the applicant nor the administrator need verify the identity of a legal guardian or authorised representative or take any other action in order to rely on a declaration completed by that legal guardian or authorised representative within the individualised online portal, which is referred to in order 6 of my earlier orders of 31 May 2024, as proof of authority to act on behalf of a group member.
On the material before me there is a low risk that an individual who is not a group member might seek to inappropriately register using the details of another group member. In the circumstances, such an order is reasonable.
The question of authority
The applicant seeks an order that provides for authorisation for entering into and giving effect to the settlement deed. Such orders are not unusual, and although they may arguably be superfluous, they can have utility in at least some circumstances particularly where there is concern as to the breadth of the applicant’s authority to give broad releases that go beyond the precise subject matter of and parties to the proceeding.
I do not have difficulty with making orders that clarify the applicant’s authority to bind group members in the manner proposed. Indeed, in Newstart 123 Pty Ltd v Billabong International Ltd (2016) 343 ALR 662; [2016] FCA 1194, I discussed this matter and said at [55] to [62]:
The releases to be provided by group members as against Billabong itself accord with the notifications given. I will deal with the releases against related parties later.
First, in my view I have clear statutory power to make proposed orders dealing with the authority question covering the breadth of the releases against Billabong, putting to one side the related party releases for the moment. Sections 33ZF and 33Z(1)(g) are sufficiently broad. Moreover, in terms of s 33ZB, any order made under s 33Z(1)(g) can bind accordingly. Such powers are not limited to the pleaded claims.
Second, there is little doubting the statutory authority of an applicant in a representative capacity under Pt IVA taking action which binds group members. If it be accepted that an applicant has statutory authority on behalf of group members to negotiate and enter into a settlement agreement subject to Court approval, then such an applicant has implied statutory authority to negotiate and agree to ancillary and reasonably tailored and proportionate terms and conditions, such as broader releases, to achieve the primary aim.
Third, there may be doubt as to how far any such releases could extend beyond the pleaded case but still be within such authority. But there are several practical answers that can be given. If the releases deal with non-pleaded claims which if brought within separate later proceedings could be the subject of an issue estoppel or Anshun estoppel if the first proceeding had been litigated to judgment, then there would be such authority. It would be counterintuitive to suggest otherwise. Not to permit of the authority to give such a broader release would condone of a situation (the bringing of a later proceeding) which by definition would be an exercise in futility. But more fundamentally, if an applicant had authority to apply to amend the proceeding to bring such a new claim on behalf of group members, why would not the applicant have the authority to release the new claim without going through unnecessary formalities in the context of a s 33V process?
Fourth, in those cases where a group member has opted in to or registered in respect of a settlement (or at the least has chosen not to opt out) with notice of its terms including broader releases, such conduct in a particular case may separately constitute implied authority.
Fifth, in any event if there is a doubt or authority needs to be extended beyond any express or implied statutory authority, the statutory powers referred to above can be exercised. Having viewed the settlement agreement and the releases in the present case, I am satisfied that I should make the order sought on this aspect insofar as the releases concerning Billabong.
As to the releases against related entities of Billabong, it must be said that the orders of Murphy J of 22 September 2015 and 5 August 2016 and the notification protocols thereunder did not expressly advert to the same, contrary to the suggestion made in some of Newstart’s material before me. Preferably this ought to have been done. But notwithstanding this omission, although with some hesitation, I am prepared to accept the following:
(a) First, releases of this type are a common feature of settlements of commercial litigation.
(b) Second, the settlement with Billabong would have been unlikely to have been obtained absent such broader releases.
(c)Third, there is no suggestion in the material that claims against related entities had any significant value that was being given away.
(d) Fourth, I do not consider it realistic that a RGM or UGM (particularly those who had a very modest holding of Billabong securities) would have taken any different course in response to Murphy J’s orders of 22 September 2015 and 5 August 2016 even if the notification protocols had referred expressly to the potential for releases against related entities.
(e)Fifth, my observations set out above on the authority question apply in this context as well.
In my view it is appropriate to make the orders sought, the effect of which will be to bind RGMs and UGMs to the releases in the settlement agreement, including the releases against related entities of Billabong. For completeness, I should note on this aspect that I do not consider it necessary to formally modify paragraph 10(b) of the orders of Murphy J of 22 September 2015 given the operation of the settlement agreement concerning the releases once approval is given. Further, what I have said in the preceding paragraph partly deals with one aspect of the objection of Greenspot Pty Ltd.
In that case, I made the following orders:
1.Pursuant to sections 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth) (Act), settlement of the proceeding upon the terms set out in the Settlement Agreement executed by the Applicant, the Respondent, Slater and Gordon Limited and Comprehensive Legal Funding LLC dated 11 July 2016 (Settlement Agreement) and the Settlement Distribution Scheme (and any annexures) filed by the Applicant (Settlement Documents) be approved.
2.Pursuant to section 33ZF of the Act or otherwise, the Court authorises the Applicant nunc pro tunc for and on behalf of the Group Members (being those persons who meet the definition of “Group Member” in the Further Amended Statement of Claim and who did not file an opt out notice) to enter into and give effect to the Settlement Documents and the transactions contemplated for and on behalf of Group Members.
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I see no reason not to make similar orders here subject to one matter which I have dealt with in the orders made in “Other Matters” that I discussed with counsel including Dr Michael Rush KC for ANZ who acquiesced in the qualification suggested. I do not need to elaborate further.
Let me now turn to the question of funding and the ATE premium question.
Litigation funding — common fund order and ATE premiums
Woodsford Litigation Funding 19 LLP (the funder) has funded the legal costs of the applicant in this proceeding. The funder, Woodsford Group Limited, a company incorporated and registered in England and Wales, and Woodsford Australia Limited have been granted leave to intervene in relation to this application.
The funder and these other entities seek the payment to the funder of the following amounts pursuant to the proposed SDS.
First, a funding commission of $14,375,726.12 in exchange for funding the own-side costs of the litigation and providing an unlimited indemnity to the applicant for adverse costs by way of a common fund order.
Second, reimbursement of amounts incurred or to be incurred with respect to “after the event” (ATE) insurance, which provided cover for the applicant up to the policy limit for adverse costs, of $1,167,148.
Third, reimbursement of the costs incurred in operating a registered managed investment scheme in relation to the proceedings during the period in which it was the legislative requirement that that occur.
I will approve the deductions of these amounts in approving the settlement and the SDS.
First, these amounts are fair and reasonable, in that they provide the funder with an appropriate return for funding the own-side and adverse costs of the litigation since commencement which appropriately balances the significant risks that it assumed with the interests of the applicant and the group members.
Second, the funding commission is in line with that which the funder bargained for under its litigation funding agreement with the applicant (the LFA).
Third, the return to the funder is consistent with the deductions for funders approved in other representative proceedings in this Court and other State courts.
Common fund order
I will make the common fund order sought, and provide that the funding commission be deducted from the common fund constituted under the SDS, for the following reasons.
First, the funder has, since resolving to fund the claim in November 2021, paid a significant amount to fund the applicant’s legal costs and other disbursements. This is a substantial investment, without which the applicant would not have been able to fund the proceedings and achieve the settlement that he has, on his own behalf and for the registered group members.
Second, the LFA expressly contemplated that the applicant would seek a common fund order at the time, relevantly, of the approval of a settlement and in the amount of the common fund order now sought. It can be inferred that the making of a common fund order at settlement and at the rate set in the LFA was an important factor in the funder’s decision to fund the proceedings; the rate was 27.5% of the net settlement sum.
Third, group members have been clearly informed that a common fund order would be sought, and the amount in which it would be sought, in the notice sent to them in relation to opt out and settlement. In the opt out notice, they were informed that a common fund order would be sought that would be consistent in amount with the success fee as defined in the LFA. In the settlement notice, the amount sought for the funding commission has been identified in dollar terms.
Fourth, the funding commission sought by the funder is appropriate having regard to the risks that the funder assumed. These risks included:
(a)a substantial commitment to the costs of bringing the proceedings, with over $5 million spent, a significant amount committed under the LFA and the potential to fund cost overruns;
(b)an adverse costs indemnity which was unlimited in amount and, while partially offset by ATE insurance, left the funder was real residual uninsured risk in respect of the respondent’s costs;
(c)the uncertainty at the time the funding commitment was entered into in 2021 around whether common fund orders could or would be made;
(d)the uncertainty around the prospects and the quantum of the claim; and
(e)the length of time the proceedings have taken to reach a resolution.
Fifth, the funding commission is proportionate to the overall settlement sum and accords with commissions approved in other Part IVA proceedings. The funding commission sought equates to approximately 25% of the gross settlement sum. This is within the range of rates of commission approved by the Court, and within the range of prevailing market parameters.
ATE insurance
The funder obtained a policy of ATE insurance on 24 November 2022 to cover adverse costs that the applicants or the funder were ordered or agreed to pay to the respondent in these proceedings. This policy was obtained to provide the applicant with additional protection against adverse costs and to assist in the provision of security for costs in the proceedings, which was provided by way of deeds of indemnity from the ATE insurer. Absent the ATE insurance, it would not have been possible to provide security for costs in this way.
To date, Woodsford has paid a significant amount in upfront premiums and a significant amount for deeds of indemnity. Under the policy, a significant amount is payable as a deferred and contingent premium, which will be due now and payable to the ATE insurer. The total cost of the ATE insurance is $1,167,148.
In my view it is appropriate in this case for the cost of the ATE insurance to be a deduction from the SDS, in addition to the funding commission, for the reasons advanced by Mr James Arnott SC for the funder and associated entities, which reasons in large part I have accepted.
First, obtaining ATE insurance has provided significant value to group members because it has allowed security for costs to be provided by way of deeds of indemnity from the insurer. Without ATE insurance, this would not have been possible. If security for costs had had to be provided by way of the payment of funds into Court or bank guarantee, then the cost of placing security would have been greater, the funder would have had to spend more and would therefore have priced its return differently, by requiring a higher return, including to reflect any additional capital tied up as security in the proceedings during its course.
Accordingly, the ATE insurance has likely resulted in the proceedings being funded at a lower overall cost to group members than would have been the case without it. And without it, it is likely the funder would have sought a higher funding commission to reflect the increased risk that it assumed and the capital that it was required to deploy during the life of the proceedings.
Second, the ATE insurance costs represent a small proportion of the overall settlement sum being around 2% of the gross settlement sum.
Third, in addition to being disclosed in the settlement notice to group members, disclosure of the intention to seek ATE insurance premiums as a deduction from the settlement sum was made clear to the applicant in the LFA and the costs of the ATE insurance were disclosed to the applicant in relevant disclosure notices.
Managed investment scheme costs
These proceedings were brought, and funded, during a period when funded class actions were required to be registered as managed investment schemes with ASIC. This requirement arose from an earlier decision of the Full Court as to the character of a funded class action and was also reflected in the Corporations Amendment (Litigation Funding) Regulations 2020 (Cth).
Consistently with these requirements, Woodsford Australia Limited assumed the role as responsible entity of a registered management investment scheme entitled “Woodsford – ANZ Credit Cards – Litigation Funding Scheme” (the ANZ MIS). An initial and supplementary product disclosure statement for the ANZ MIS were prepared and provided to the applicant and published on Woodsford’s website. On 28 November 2021, the applicant applied to become an “active general member” of the ANZ MIS, and was accepted by the responsible entity on 1 December 2021.
On 16 June 2022, the Full Court delivered judgment in LCM Funding Pty Ltd v Stanwell Corporation Ltd (2022) 292 FCR 169, which decided that funded class actions were not managed investment schemes.
After the decision in LCM Funding, Woodsford Australia Ltd took steps to deregister the ANZ MIS as it was no longer necessary for it to exist. The ANZ MIS was ultimately deregistered on 31 December 2022.
However, fees were incurred to operate the ANZ MIS in the period from its inception until it was deregistered. It is appropriate that the costs arising from the ANZ MIS be reimbursed through the SDS.
First, the creation and operation of the ANZ MIS from inception until deregistration was necessary because of the particular regulatory regime imposed on funded class actions in that period. Thus, the proceedings could not be brought if the ANZ MIS was not brought into existence.
Second, given the relatively onerous obligations and responsibilities arising under Chapter 5C of the Corporations Act 2001 (Cth), it is unsurprising that properly running the ANZ MIS gave rise to real costs.
Third, these costs were incurred for the benefit of the applicant and the group members, and it is appropriate that they be reimbursed by them, given that the existence of the ANZ MIS was to their benefit.
Fourth, these costs have been kept to a minimum by the prompt action taken by Woodsford Australia Ltd to deregister the ANZ MIS following the Full Court’s decision in LCM Funding.
Summary
So, the distribution sought from the settlement sum under the SDS for the funding commission, ATE insurance costs and MIS costs are fair and reasonable and ought to be approved under s 33V(2).
Conclusion
In summary and for the foregoing reasons, I have approved the settlement under s 33V(1) and made the necessary distribution orders under s 33V(2).
I certify that the preceding one hundred and six (106) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach. Associate:
Dated: 20 December 2024
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